Questions and Info relating to Property Issues inc, Charging Orders and Repossession

Moderators: TalbotWoods, JaneClack

By wisernow
#472356 I wonder if anyone of the advisors on the forum could advise how the new pension freedom rules will affect debtors?
Will the fact that a debtor in retirement or aged over 50 with a reasonable private pension be required to cash in the pension to pay towards their dmp or iva for example?
I believe under the existing rules it is harder for creditors to get at a debtors pension.
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By JaneClack
#472357 That is an interesting conundrum really!

I would say no as drawing down from a pension is something one can do but it is not deferring it as it would be if it had finished and you were just delaying the payout. You would still be paying into a pension but drawing down part of it.

However, who knows what will happen and I will certainly check on this.I can imagine what creditors might say but then the government may end up having to pay extra income support for people who had had to draw down from their pensions for benefit of creditors.
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By JaneClack
#472358 Have a look at this - it is being appealed at present but until any appeal is won, it holds true.

http://www.sackers.com/pension/horton-v ... mber-2014/


Horton v Henry (High Court) – 17 December 2014

The High Court has rejected an application from a trustee in bankruptcy for access to a bankrupt’s pensions which are not yet in payment.

This decision is in direct contrast to the 2012 case of Raithatha v Williamson, in which the High Court held that the pension benefits of a bankrupt, who is entitled under the rules of his / her scheme to draw their pension but who has not yet done so, can be the subject of an Income Payments Order (IPO).

Background

Mr Henry was adjudged bankrupt in December 2012, aged 58. His assets at that time included four pension policies – a SIPP and three further personal pension policies.

The trustee in bankruptcy sought an IPO over the 25% tax free lump sum potentially available from the SIPP, 36 monthly payments from the SIPP in flexible drawdown and the annuity value of the personal pensions for the next three years. In order to bring these benefits into payment, Mr Henry would have needed to crystallise his SIPP and personal pension policies.

In evidence, Mr Henry had stated that he did not need to access his pensions in order to meet his ordinary domestic needs (he said that he relied on friends and family to help meet these). Instead, he wanted to preserve his underlying pension funds intact for as long as possible, with the aim of passing on his SIPP to his children in due course. He therefore had no intention of drawing down his pensions.

Decision

The judge rejected the application of the trustee in bankruptcy, having considered two issues:
•whether the court had power under s.310 of the Insolvency Act 1986 to make an IPO in respect of a pension which is not in payment; and
•if there is such a power, what amount, if any, should be retained by Mr Henry rather than paid to the trustee.

The judge in the earlier Raithatha case had concluded that a bankrupt has “an entitlement to a payment under a pension scheme not merely where the scheme is in payment of benefit but also where, under the rules of the scheme, he would be entitled to payment merely by asking for payment”.

However, whilst the Judge in Horton found that the earlier judgment could not be distinguished on its facts from the present case, he felt unable to follow that decision.

In determining whether the court had power to make the IPO, the judge considered “whether a bankrupt “becomes entitled” to a pension under an uncrystallised pension even though […] he would not be receiving any payments from the pension trustees and would have no enforceable claim for payment against them”. Going by the ordinary meaning of the word, he found that the word “entitled” in s.310 was a reference to a pension in payment, under which definite amounts have become contractually payable.

The Judge went on to note that there was no obvious wording in s.310 which would give the court power to decide how a bankrupt is to exercise the different elections open to him under an uncrystallised SIPP or personal pension. Nor was there any obvious route for a trustee in bankruptcy to be said to have the power. He was also of the view that giving a trustee in bankruptcy the ability to determine how the contractual rights under a SIPP or personal pension should be exercised would conflict with the intention behind the Welfare Reform & Pensions Act 1999, which excludes a bankrupt’s rights under a pension scheme from his / her estate in bankruptcy.

Comment

It is very unusual to have two different, conflicting, decisions from courts at the same level. It is a well-established principle that a judge at first instance should, in general, follow another decision at first instance, unless convinced that the decision was wrong.

Although the Raithatha decision opened the door to trustees in bankruptcy seeking IPOs over pensions and lump sums from those aged 55 or over who have a statutory right to bring their pension benefits into payment, the 2014 decision in Re X (Application for Income Payments Order) illustrated some of the difficulties that this scenario gave rise to. In that case, the District Judge expressed the difficulty of attempting to determine how a pension should be brought into payment when there are various options and, in so doing, the court would be effectively removing the bankrupt’s right to decide both how and when to take his or her benefits.

The decision is Raithatha has attracted much comment and a certain amount of criticism. Although the case was initially appealed, the parties settled, leaving the law in this area unclear.

We understand that permission to appeal has been given to the trustee in Horton, paving the way for the Court of Appeal to consider this case in spring 2015.
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By JaneClack
#472374 Hi - having spoken to the IPs their response is that it depends on whether they are your trustee in bankruptcy or supervisor in an IVA as in an IVA they only have the powers contained in the IVA which do not include the power to force clients to do anything with any sort of force compared to the trusteee in bankruptcy.

At present they exclude pension pots from IVA and only treat th receipt of pension annuity as income when it is received during the term of the IVA.
By Was Iphigenia
#472476 May I ask a question on behalf of A.N. Other, please?

Bankrupt in early 2006, aged 45, no IPA, discharged early.

An old pension savings plan has emerged and contacted them, saying there is quite a nice little pot there, despite no contributions having been made for well over 10 years.

Bankrupt is hoping to take the 25% at 55 (2016), though probably not the remainder.

The pensions savings company is now saying that because they have been bankrupt, the OR will have an interest in the 25%, and therefore any payment of said 25% will have to be handled through a firm of solicitors, whom they specify.

Does this sound right?

Ta,
By sally1
#472477 Hi, I am helping out Sarah at the moment.
As A N other was under the age of 51 when s/he was made bankrupt and s/he had no IPA, providing the pension is approved by HMRC, s/he should be able to keep all of the pension. Did A N Other inform the OR of the fund when s/he went bankrupt?